5 Common Car Insurance Myths

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Don’t buy into these myths that could affect your finances.

Key points

  • Many people buy into common car insurance myths.
  • This includes the belief that the color of the car is important.
  • Some people also don’t realize that credit affects insurance rates.

Car insurance is an important type of insurance protection that every driver should have. This is not just because most states require coverage, but also because auto insurance provides significant asset protection.

Unfortunately, many consumers have big misunderstandings about auto insurance that could affect the premiums they pay or the coverage they get. In particular, here are five common myths that many drivers believe.

1. The color of the car matters

One of the biggest misconceptions that many people believe is that the color of a car affects auto insurance premiums. In particular, it is commonly believed that red cars cost more to insure.

In reality, the color of the car has no impact on car insurance premiums. The make and model of a vehicle can affect the cost, as different types of cars can be more or less secure and more prone to theft. But because color alone doesn’t affect the likelihood of an insurance claim occurring, it’s not a factor insurers consider when deciding the cost of coverage.

2. The credit will not affect your rates

Some people mistakenly believe that their credit score is entirely separate from insurance and has no impact on the rates they are charged. The reality is that insurers view credit history as a risk assessment method of providing insurance. Those with a history of black marks on their credit report are often considered higher risk consumers to insure, so they end up paying higher premiums as a result.

3. Your insurance covers all possible losses

Another common misconception is that auto insurance covers all types of claims that might occur. The reality, however, is that drivers face substantial risk of payouts depending on the type of insurance they have.

For example, if a driver purchases only the minimum coverage required by their state, they will end up with a liability-only policy. Their insurance would pay for the damages that other drivers incur if the covered policyholder has caused an accident. But without collision or comprehensive coverage, an insurer would pay nothing if the car was stolen or if the driver had an accident and damaged his own vehicle.

Every motorist should understand what types of coverage are available and ensure they purchase all the protection they need.

4. If someone else drives your car, their insurance covers it

Auto insurance is generally based on the vehicle rather than the driver. It’s common for car owners to be unaware of this and assume that lending a car to a friend is risk-free, as the friend’s insurer would cover the cost if something goes wrong.

In reality, if a motorist lets someone drive their car and that person has an accident, the car owner’s insurer will cover the losses. And that could make car insurance more expensive for that owner.

5. The professional use of your car is covered by personal insurance

Finally, many people mistakenly assume that if they use their car for business purposes, they will be covered. This is not necessarily the case if a motorist has personal insurance and has not disclosed that the car will be used for business purposes. It’s important to be clear with an insurer about how a car is used to ensure the insurance provides the appropriate coverage.

By understanding the reality behind these myths, drivers can be sure they are getting the protection they need and can realistically understand the factors that affect their premium price.

Make sure you choose the right auto insurance coverage

Car insurance is something most people don’t think about very often. Although there are many factors that lead people to change car insurance companies, it is important to educate yourself to ensure you choose the right coverage for you. The right coverage means not paying for coverage you don’t need and not giving up coverage that is right for you. Although price is a major factor, we also consider other factors such as customer service and the claims process when choosing what we believe are the best auto insurance providers.

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